Finance Test 2 Formulas

Finance Test 2 Formulas - isk Common Stock B Return-6 6 16...

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Ex Common Stock A Probability 0.25 0.5 0.25 Expected Rate for A is A6 (B6) + A7 (B7) + A8 (B8) Expected Rate for B is D6 (E6) + D7 (E7) + D8 (E8) + D9 (E9) Standard Deviation for A is {(12%-15.50%)^2 (0.25) + (16%-15.50%)^2(0.50)+(18%-15.50%)^2(0.25)}^.5 0.122500% 0.002500% 0.062500% STANDARD DEVIATION MEANS RISK
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xpected rate of return and ri Return Probability 12% 0.15 16% 0.35 18% 0.35 0.15 IS 15.50% IS 9.80% IS 2.18% 0 0 0 0.047500%
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Unformatted text preview: isk Common Stock B Return-6% 6% 16% 20% Standard Deviation for B is {(-6%-9.80%)^2 (0.15) + (6%-9.80%)^2(0.35)+(16%-9.80%)^2(0.35)+(20%-9.80%)^2(.15)^.5 2.496400% 0.144400% 0.384400% 1.040400% IS 8.46% 0.01 Required rate of return using CAPM Common Stock has beta 0.9 Risk-free rate is 7.00% Expected Return of 15.00% 7% + (0.9)(15%-7%) 14.2 B5 + B4*(B6-B5) 14.20%...
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